Beware the Middleman: Empirical Analysis of Bitcoin-Exchange Risk

[Kenshin]

Very interesting white paper about the Bitcoin Exchange Risk

http://fc13.ifca.ai/proc/1-2.pdf

Abstract.
Bitcoin has enjoyed wider adoption than any previous crypto-currency;
yet its success has also attracted the attention of fraudsters who have taken ad-
vantage of operational insecurity and transaction irreversibility. We study the risk
investors face from Bitcoin exchanges, which convert between Bitcoins and hard
currency. We examine the track record of 40 Bitcoin exchanges established over
the past three years, and find that 18 have since closed, with customer account
balances often wiped out. Fraudsters are sometimes to blame, but not always. Us-
ing a proportional hazards model, we find that an exchange’s transaction volume
indicates whether or not it is likely to close. Less popular exchanges are more
likely to be shut than popular ones. We also present a logistic regression showing
that popular exchanges are more likely to suffer a security breach.

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[rojuwah]

man I was gonna open a topic and link the same article which I just encountered. I think we must be all mad playing with currencies on exchanges. The only smart investment that is likely to return back seems like cold storage. Even Kaiser says he lost bitcoins more than anybody and he is a troll. As long as our money stay for long on exchanges, 18/40 exchanges shut down, 5 of them repaying, leaving 13/40 of them go away that u don't see ur money again, so it is about 1/3 chance that we never see our investments back according to the study in the article and I buy that, we all see what happens to gox. I think I will really get out of exchanges soon, and store stuff in cold, maybe until when trustable decentralized exchanges show up. I absolutely do not understand noone responding ur topic, this whole thing is madness or delusion.

[bananas]

it is unsafe really, very unsafe. but there is no option if you really want to deal with bitcoin

[waxwing]

it is unsafe really, very unsafe. but there is no option if you really want to deal with bitcoin

First, there is an option for buying and selling which doesn't involve exchanges - localbitcoins.

Second, even if you have to go via exchanges, you can limit your exposure drastically by following the simple procedure: 1 fund account 2 buy bitcoins 3 immediately withdraw bitcoins.

This is what sensible people do. If you plan to daytrade then, sure, leave your btc on the exchange but factor in a LARGE possibility of the loss of all of your capital.

[bananas]

localbitcoins have a middle men, possible in person transactions are not significative nor efficient